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Mon 1 Dec 2008 07:18 AM

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Oil falls by $1 after OPEC delays output cut vote

Price loses nearly 20% in Nov, following 32% drop in Oct, biggest ever monthly fall.

Oil fell by more than a dollar on Monday, towards $53 a barrel, after producer cartel OPEC decided over the weekend to delay a third supply cut to its next meeting later in December as economic woes cripple oil demand.

Gulf producers want to see strict compliance with recent output curbs of 2 million barrels per day (bpd) before considering further reductions when the Organisation of the Petroleum Exporting Countries (OPEC) meets in Algeria on Dec. 17.

US light crude for January delivery fell $1.13 to $53.30 a barrel, after having dipped below $53 earlier.

Oil settled down 1 cent at $54.43, against its Wednesday settlement in thin trading in a shortened, post-Thanksgiving holiday session on Friday.

London Brent crude slid $1.27 to $52.22.

"As expected, the cartel did not announce further production cuts," Jonathan Kornafel, director of Asia Hudson Capital Energy, said in a note.

Delegates said ministers discussed how much more they needed to cut in December. Most, including Gulf producers led by Saudi Arabia, saw a requirement to trim another 1 to 1.5 million bpd.

Prices lost almost 20 percent in November, after a 32 percent drop in October, the biggest monthly fall ever, despite OPEC's two supply cuts since September aimed at taking around 2 million bpd out of the market.

"Evidently there is too much oil around. US imports surged 10 percent for the week. The longer OPEC waits to cut supplies, the higher stocks rise and the longer we think it'll take for fundamentals to tighten once the tide does turn," Jan Stuart, economist with at UBS in New York, said in a weekly US oil data report.

Oil has tumbled from record highs over $147 a barrel struck in July as demand in the United States and other large consumer nations has slumped amid an economic crisis.

In a rare move, Saudi Arabia on Saturday cited $75 a barrel as a "fair price" for oil in order to keep the more expensive new projects at the margins of world supply on track, the first time in years that the world's biggest exporter has identifed a target for crude prices. (Reuters)

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